UK's Forum Energy to drill for oil in Spratlys

MANILA, Philippines - After years on the negotiating table, the government has finally allowed UK-based Forum Energy Ltd. to drill an oil well on a disputed area at the South China Sea.

In a statement, Forum Energy said the Department of Energy (DOE) has approved the conversion of its geophysical survey and exploration contract (GSEC) 101 to a service contract, clearing the way for the company to implement its drilling work program at the Reed Bank Basin which includes the Kalayaan Island Group in the Spratlys Islands.

Forum Energy has a 70-percent interest in GSEC 101, which is the company’s principal asset, situated west of Palawan in the South China Sea.

In 2006, a 3D seismic survey over the area confirmed a minimum of 3.4 trillion cubic feet proven gas reserves in place with significant upside potential.

 “We are very pleased to have finally secured the service contract over the GSEC 101 area in what is a company-changing development for Forum Energy,” said Walter Brown, Forum Energy chief executive officer.

In August 2007, Forum Energy farmed out its 30 percent interest in GSEC 101 to Brown’s Monte Oro Resources and Energy Inc., which paid $1.7 million for the right to participate in the work program.

Brown said they are confident this project will help in promoting the use of alternative fuels such as liquefied natural gas (LNG) in the country.

“We intend to push forward with the appraisal of this gas field to commerciality and ultimately to the delivery of material value to our shareholders. Given the potential size of the resource and proximity to the Asian markets, we believe this project is an ideal candidate for an LNG facility,” he added.

The Philippine government had been cautious in approving Forum’s application to avoid possible conflict with other neighboring nations as the contract was seen overlap with the then existing joint marine seismic undertaking (JMSU) involving China, Vietnam and the Philippines.

The JMSU, a tripartite agreement signed on March 2005, involved a joint research of petroleum resource potential in the South China Sea. This agreement lapsed in July 2008, with the three countries still not acting on its possible extension.

Prior to the approval, the DOE was supposed to conduct a bidding for international contractors to conduct seismic acquisition program for the Reed Bank Basin.

The DOE even came up with a shortlist of international contractors for the 2D seismic survey but did not push through with the bidding of the Philippine National Continental Shelf Delimitation Project worth an estimated P75 million.

The DOE said this is merely a data gathering that would allow the Philippine government to identify potential reserves in these areas.

“The provision of services to acquire and process new 2D seismic data, gravity and magnetic data in the Reed Bank and Kalayaan Island Group for the Extended Continental Shelf (ECS) project submission to the United Nations Convention on the Law of the Seas,” the DOE said.

The Reed Bank Basin measures about 71,000 square kilometers and located about 250 km west of Palawan.

The DOE earlier estimated that total resources in the basin is around 440 million barrels of oil.